Government-backed startup fund Breakthrough Victoria will lose $360 million in funding over four years and pursue fewer investments each year, as the state Labor government attempts to “reprofile” its venture capital operation.
Launched in November 2020 with $2 billion in pledged funding, Breakthrough Victoria is tasked with injecting “patient capital” into growth sectors like advanced manufacturing, the green economy, and biotechnology.
It is empowered to commit anything from pre-seed investments of around $150,000, through to investments of $15 million towards mature enterprises.
Since launch, Breakthrough Victoria has deployed more than $330 million, including investments in portfolio companies RayGen, Zena Sport, and American firm World View, which received a $37 million injection last week.
But Breakthrough Victoria has endured media criticism in recent months, after revelations it spent $22 million in 2023 to deploy a comparatively small $73.7 million in capital.
In the state’s 2024-2025 budget, handed down Tuesday, Treasurer Tim Pallas announced significant cutbacks to the cornerstone fund.
It will have its funding reduced by an average of $90 million a year over the next four years.
At the same time, the fund’s investment profile will be extended from ten years to fifteen.
This will give it “more time to review and be selective about quality investments,” Pallas said.
Budget papers show Breakthrough Victoria is projected to invest in 19 entities over 2023-2024, ahead of its target of 15.
The target for 2024-2025 is 10 as a result of the reshaped investment profile.
LaunchVic — the other headline venture organisation backed by the state government — will face a $40 million funding injection.
This funding will ensure LaunchVic can “continue fostering the capabilities and confidence of future innovators, creators and entrepreneurs,” budget papers state.
The organisation will aim to assist 142 companies and market entrants over the next financial year, with budget papers noting its focus on empowering female-founded startups.
“The Victorian government should be commended for its commitment to the local startup sector through the refunding of LaunchVic for a further four years,” LaunchVic chair Leigh Jasper said in a statement.
“This is a great vote of confidence in LaunchVic and the role it has played in driving massive growth for Victoria’s startup sector.
“The funding also comes at a pivotal time for the Victorian startup sector.
“If we are to become a truly global ecosystem there’s still a lot more we need to do to unlock startups, capital and talent.”
The budget also heralds changing strategies within the Alice Anderson fund, LaunchVic’s $10 million sidecar fund dedicated to startups founded by women.
It counts investments in 33 portfolio companies in 2023-2024 but will chase a target of five held investments from 2024-2025 onwards.
“LaunchVic will continue to provide equity investment to female-founded startups,” budget papers state.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
